state bureaucracy during postwar reconstruction and the early stages of high-speed growth. Its principal advantage is that the state's priorities take precedence over those of private enterprise. Its primary disadvantages are that it inhibits competition, and therefore tolerates gross inefficiency in the economy, and that it fosters irresponsible management. The closest Japanese approximations to it occurred in Manchuria, in the prewar and wartime electric power generating industry, in the wartime munitions companies, in the postwar coal industry, and in the hundred or more public corporations of contemporary Japan. The inefficiencies of state control are commonly blamed for the poor performance of Japanese industry during the Pacific War.
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The third form of the government-business relationship, that of public-private cooperation, is by far the most important. Although all three forms occurred throughout the entire 50 years of this study (depending primarily on variations in the political power of the state and private enterprise), the broad pattern of development since the late 1920's has been from self-coordination to its opposite, state control, and then to a synthesis of the two, cooperation. The chief advantage of this form is that it leaves ownership and management in private hands, thereby achieving higher levels of competition than under state control, while it affords the state much greater degrees of social goal-setting and influence over private decisions than under self- control. Its principal disadvantage is that it is very hard to achieve. It flourished in Japan during the 1950's and 1960's primarily because of the failure during the 1930's and 1940's of both of the other modes of the government- business relationship. During high-speed growth Japanese-style government-industrial cooperation came as close to squaring the circleto achieving social goal-setting without the disadvantages of socialismas any form of mixed economy among all the historical cases.
The chief mechanisms of the cooperative relationship are selective access to governmental or government-guaranteed financing, targeted tax breaks, government-supervised investment coordination in order to keep all participants profitable, the equitable allocation by the state of burdens during times of adversity (something the private cartel finds it very hard to do), governmental assistance in the commercialization and sale of products, and governmental assistance when an industry as a whole begins to decline.
This form of the government-business relationship is not peculiarly or uniquely Japanese; the Japanese have merely worked harder at perfecting it and have employed it in more sectors than other capitalist nations. The so-called military-industrial complex in the United States, to the extent that it identifies an economic relationship and is not merely a political epithet, refers to the same thing. If one were to extend the kinds of relationships that exist between the U.S. Department of Defense and such corporations as Boeing, Lockheed, North American Rockwell, and General Dynamics to other sectors of industry, and if one were also to give the government the power to choose the strategic sectors and to decide when they were to be phased out, then one would have a close American approximation of the postwar Japanese system. The relationship between government and business in the American national defense industriesincluding the unusual management and ownership arrangements for the nuclear weapons
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laboratories and the existence of such official agencies as the former Atomic Energy Commission and the National Aeronautics and Space Administrationis thought by Americans to be exceptional, whereas it was the norm for Japan's leading industrial sectors during high-speed growth. It is also perhaps significant that aviation, space vehicles, and atomic energy are all sectors in which the United States is preeminent, just as Japan is preeminent in steel production, ship-building, consumer electronics, rail transportation, synthetic fibers, watches, and cameras.
As noted earlier, the cooperative government-business relationship in the capitalist developmental state is very difficult to achieve and maintain. Even with such deeply entrenched social supports for cooperation as a shared outlook among government and industrial leaders because of common education (for instance, at Todai * Law) and an extensive cross-penetration of elites because of early retirement from government service and reemployment in big business, the Japanese have difficulty in keeping public-private cooperation on the tracks. Industry is quite willing to receive governmental assistance, but it does not like government orders (as the steel and automobile industries illustrate). Government is often frustrated by the excessive competition and preemptive investment of industries it is trying to foster (as the petrochemical and textile industries illustrate). Nonetheless, the Japanese have worked hard to create cooperative relationships and have developed numerous unusual institutions through which to pursue them. These include the official 'deliberation councils' such as the Commerce and Industry Deliberation Council of 1927, the Cabinet Advisers Council of 1943, the Industrial Rationalization Council of 1949, and the Industrial Structure Council of 1964; MITI's vertical bureaus and the corresponding officially sanctioned trade associations for each industry; the temporary exchange of officials between the state and private enterprise (for example, the posting of young MITI officers to Keidanren headquarters); the formal 'discussion groups' implemented in the wake of the failure of the Special Measures Law; and the practice of administrative guidance, in which government officials and representatives of banking and industry can coordinate their activities unconstrained by law and lawyers.
In addition, the Japanese have fostered social supports for cooperation. We have already mentioned two of themthe essentially bureaucratic education of both public and private managers and the extensive 'old boy' networks. It should not be thought that these are the only social supports or that they are not duplicable in other societies. They would be very hard to duplicate in other societies, since
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they rest on long-entrenched practices, but they are not pure cultural givens. As this book has sought to show, there was more consensus and cooperation in Japan during the 1950's than during the 1930's, which suggests that the reasons for this difference are to be found in changed historical circumstances and political consciousness and not in something as relatively unchanging as cultural mores. Some other social supports for government-business cooperation include the virtual impotence of corporate stockholders because of the industrial financing system; a work force fragmented among labor aristocrats enjoying semilifetime employment, temporaries, small-scale subcontractors, and enterprise unions; a system of collecting private savings through the postal system, concentrating it in government accounts, and investing it in accordance with a separate, bureaucratically controlled budget (FILP); some 115 government corporations covering such high- risk areas as petroleum exploration, atomic power development, the phasing out of the mining industry, and computer software development (these corporations are the successors to the national policy companies of the 1930's, the eidan of the wartime era, and the kodan * of the occupation); and a distribution system that serves not only to retail goods but also to keep the unemployed, the elderly, and the infirm working, thereby weakening demands for a welfare state in Japan.
In Japan, as compared with the United States, one of the most powerful social supports for private managers' cooperation with the government is that Japanese managers enjoy freedom from being judged exclusively in terms of short-term financial performance. Just as the essential spirit of Japanese industrial policy after the late 1920's lay in the search for ways to replace competition with cooperation without a drastic loss in efficiency, the industrial rationalization campaigns sought criteria of good management other than short-term profitability. These included the maintenance of full employment, increased productivity, expansion of market share, cost reduction, and the management of long-term innovation.
Morita Akio, chairman of Sony Corporation, believes that the emphasis on profitability has been a major cause of American industrial decline. He asserts, 'The annual bonus some American executives receive depends on annual profit, and the executive who knows his firm's production facilities should be modernized is not likely to make a decision to invest in new equipment if his own income and managerial ability are judged based only on annual profit.'
1
Morita believes that the incentive structure of postwar Japanese business has been geared to developmental goals, whereas the incentive structure
